Editors' pick: Originally published June 9.
"I think we're the better brand, but we're not the easy [to buy] brand," conceded Yum! Brands CEO Greg Creed during an investor presentation Wednesday. According to Creed, there are three components to being a highly accessible fast food brand to consumers. The first is offering value in what is always a very competitive industry. Pizza Hut has worked to address that by introducing its "$5 Flavor Menu" late last year and unveiling more pizza promotions. The $5 menu offers consumers a choice of several items, including a medium one-topping pizza, eight buffalo wings and a pasta dish, for $5 each.
The other two components behind fixing Pizza Hut, which has about 8,100 U.S. locations including its Express format vs. north of 5,200 for Domino's, will take more time to execute.
Explained Creed, "we have to get our technology in shape in order to be as easy to order, pay and track [as possible], and I think as we build the brand and we get that in shape, we'll actually build more units and that will give us greater physical access." He added, "we're slower than Domino's, I know about how much -- I also know if everything else was equal, we'd be allowed to be a little slower, but the difference between what would be allowed and where we are today is too big."
Domino's out-performed Pizza Hut last year as it promoted a new $5.99 value menu, $8.99 pan pizzas and the ease of use of its digital ordering platform. The company saw its domestic same-store sales spike 12% in 2015 compared to a 1% increase for Pizza Hut. "At the end of the day it's a combination of a number of things -- I think we got our food right starting six years ago with our re-launch, our approach to advertising has worked incredibly well with the direct honest nature of it connecting with consumers, and our technology, I think, is the best in the business," Domino's Pizza President and CEO Patrick Doyle told TheStreet in a Feb. interview about its big 2015.
In the first quarter of this year, Domino's U.S. same-store sales rose a more modest 6.4% while Pizza Hut gained further momentum, with sales up 5%. Doyle downplayed any impact of Pizza Hut's revival on Domino's first-quarter sales results, which came as a negative surprise to Wall Street, in an April interview with TheStreet.
While Pizza Hut may be behind Domino's in ordering technology and number of restaurants, it's making good progress on keeping pace in restaurant design.
Pizza Hut plans to remodel roughly 700 of its U.S. stores each year through 2022. The new format is decked out in Pizza Hut's trademark red and black colors, albeit with deeper hues, the locations feature wraparound windows, outdoor seating and yes, a drive-thru.
Domino's is aggressively remodeling its restaurants into its "pizza theater" concept, as it calls it, in order to lure in patrons. The new design features more modern-looking interior and exterior design, with seating both inside and outside, a new feature for a chain best known for its delivery cars. Customers can even watch their pizza being made, similar to what they can do at Chipotle (CMG) - Get Report .
By 2017, the company intends to finish refurbishing its entire store fleet of more than 12,000 global locations.
Creed hinted strongly Wednesday that Pizza Hut is currently enjoying another solid quarter. "I'm very bullish on Pizza Hut. I actually think in the short term, it will be the brand that surprises everybody." It may surprise the team at Domino's, too.